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When iPhone Pushes, Text Message Fees Fall

Text messages cost phone companies nearly nothing to deliver, and yet messages are billed at rates a thousand times their actual expense. This has become well known, even as carriers in the United States have raised pay-as-you-go rates for SMS (Short Message Service) from 10 to 20 cents a pop in the last year. (Randall Stross explained it well in a New York Times column in December 2008.)

It doesn't have to be that way. A revolution is brewing from the inside. When phones - specifically the iPhone - can notify their owners of incoming messages in a way that parallels SMS, how can such a ridiculous pricing structure continue to stand?

A Message You Can't Refuse -- Text messages use cellular network control channels, and, at no more than 160 characters per message plus some routing information, consume a handful of terabytes a day spread across all U.S. carriers' entire network systems. (The cell industry trade group says U.S. cell users sent 1 trillion SMS messages in 2008, or about 3 billion a day. Double that for the bandwidth to send and to receive, multiply by 150 characters, and you get 3 TB per day. But divide that by the number of base stations in urban areas, and you get only megabytes per day each.)

In handling all the administrative trivia of allowing hundreds of millions of cell phones to communicate via hundreds of thousands of base stations, these control channels pass far more data than text messages consume. Even assuming some additional cost to carry the current volume, a text message might cost a fraction of a cent in separate expense - say .01 cent or 1/10,000th of a dollar.

Why do we pay so much when we have various instant messaging services at our disposal? I have AIM on my iPhone, iChat and Skype on my Mac, Google Talk in my Web browser, and Twitterrific on my Mac and iPhone. But I still use SMS myself, even though my AT&T plan limits me to 200 incoming and outgoing messages a month.

Why SMS then? Because it's an almost guaranteed disruption. Recipients have to pay attention. Phones are designed by default to annoy us with SMS, and we generally like that for this particular category of notification. (If not, most phones let you turn off buzzing or chirping notification.)

SMS is also an always-available store-and-forward system. If your phone is off or out of cellular range, messages appear when you come back online. Whenever you're on a cell network (which is almost always for most people), SMS deliveries can happen.

Finally, SMS works with nearly all cell phones, from the cheapest on up, and among all major U.S. cellular networks. American carriers made great strides a few years ago to ensure delivery and provide standard pricing regardless of originating and receiving networks.

To combat overage charges, instead of allowing subscribers to stop receiving SMS messages, carriers added all-you-can-eat plans from $10 to $20 per month. Carriers make much more from you sending 2,000 texts at $10 a month than 200 texts at $5 per month, so it's good for them.

The reason companies charge so much is because we pay it. We don't have to text.

(In fact, if you don't want to get an SMS, it's rather hard to avoid it. Some parental monitoring add-on packages from cell carriers allow limits to be set. Ostensibly, you can call a carrier to ask SMS reception to be turned off, but posts in cell forums make that sound like a frustrating proposition.)

Push Off, Eh? But what if a service existed that would alert you on your iPhone when a message arrived from another service? A message that was included in your unlimited cellular data plan or could also be received via any Wi-Fi network to which you were connected? Where's your precious text messaging now, cellular carriers? (Evil laugh here.)

All it takes is one killer application that provides push notifications and ties into a common messaging platform, and several such applications are waiting in the wings. Skype is already available for the iPhone (see "Skype Coming to iPhone," 2009-03-30), with calls available over Wi-Fi and chat over Wi-Fi and cellular networks. Twitter and other platforms have APIs which have been used in conjunction with iPhone applications, too.

Take my primary use of SMS. If I can text my wife via a direct message on Twitter and have a notification pop up on her iPhone, there is essentially no difference between an SMS message and that Twitter message.

There are more than 400 million registered, active Skype users, tens of millions of Twitter users, and billions of combined accounts at various instant messaging services. Yes, there's more management involved in reaching someone other than knowing their phone number, an "address" that works worldwide with no additional interface. But mind the cost.

We don't know yet whether Apple will charge developers a fee for push notifications. There has been no public discussion, but I have a hard time believing that developers will be allowed to distribute an unlimited number of push notifications for free, given that these notifications must be mediated by Apple's servers.

I'd be happy to be wrong about this, but it seems that Apple will either need to limit the number of notifications per user or notifications per developer unless it charges a fee to deliver high numbers of messages and shares that revenue with carriers. Of course, these push messages will be so short as to represent negligible data channel traffic. Sounds familiar, no?

Apple also doesn't appear to be guaranteeing that push notifications will arrive. From what I can tell, it will be a best-effort system: Apple will try to deliver all messages, and hold messages for later delivery to devices that can't be reached. But some push notifications may never arrive, and that's where SMS seems to shine. (SMS is also a best-efforts system, but messages aren't deliver in a generally small set of rare circumstances, such as a handset being turned off for more than a week.)

I also wonder whether carriers outside the United States will balk at supporting an easy method of eroding their high-margin SMS services. Deutsche Telekom has already said that Skype for iPhone is an unacceptable abuse of its service, whether over 3G (where it doesn't work) or over Deutsche Telekom's Wi-Fi hotspot network. Deutsche Telekom claims that the problem is network usage, not a subversion of high-cost calls. Still, one could imagine a carrier making the same pretense about push messaging, too.

I don't like to peer into a crystal ball much, as I'm generally a reporter of what I see, rather than a prognosticator about what I can't know. But there's a huge tension created when people find themselves paying either 20 cents a message or up to $20 per month for an essentially cost-free service.

If Apple could shift the utility of SMS to another delivery mechanism that has a similar ease and reach with far less cost, at least iPhone and iPod touch owners might wave goodbye to SMS's egregious fees.

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